Chronic proliferative and erosive synovitis, as well as hepatic granulomas, can be induced in susceptible rats by systemic administration of aqueous suspensions of cell wall fragments from selected bacteria, such as group A, B or C streptococci and Lactobacillus casei. The arthritis resembles human rheumatoid arthritis in its clinical, pathological and immunological characteristics. The development of acute and chronic disease is a direct consequence of the deposition and persistence of cell wall fragments in hepatic and synovial tissues. Comparative studies in athymic/euthymic and cyclosporin A treated/control rats have demonstrated that the early acute phases of disease are independent of the thymus and T-lymphocytes; whereas, the chronic phases are thymus-dependent. Chronic disease is characterized by tissue infiltration with lymphocytes bearing T helper/inducer cell surface markers. Interestingly, bone and cartilage destruction appears to be mediated by a "transformed" appearing fibroblase-like cell. Proliferation, and bone destruction mediated by the fibroblast-like cell is dependent upon T-lymphocyte derived cytokines. The destructive process is inhibited by cyclosporin A and the retinoid, 4-hydroxyphenyl retinamid. The development of disease is paralleled by enhanced tissue expression of class II- major histocompatibility antigens. Enhanced expression of these antigens is not observed in resistant rat strains. This animal model provides a powerful tool to investigate mechanisms that regulate susceptibility to chronic inflammation, as well as mechanisms involved in tissue destruction.